Asset Transformation

I’ve been toying with the notion that business, for certain, and possibly life in general is all about asset transformation. Basically, taking one or more assets and transforming them into other assets. We transform our skills and time into money by means of a job. We transform our charm and other personal characteristics into friendships by means of social engagements. Google transforms the audience it develops from web searches into money by means of providing space for advertising. It goes on and on.

The key elements of an asset transformation include the source assets, the resulting assets and the process of transformation. It’s really interesting how well this maps onto the basic planning pattern; Step 1 – Figure out what you want, Step 2 – Figure out what you have that’s relevant, Step 3 – Figure out how to get from what you have to what you want. All planning has these elements though when performed out of sequence it often results in poor planning.

Within this are also the notions of growth and consumption. Consumption is probably the easiest to think about. If you have a fixed, finite asset and you apply a process that consumes that asset in the transformation to another asset then eventually you run out of the supplying asset. Sometimes this ok or at least necessary. Consider the asset of time as it relates to your life. Until we reach Kurzweil’s singularity it’s fixed and finite for each of us. Efficiency, of course, is all about how much resulting assets you can get from the supplying assets. Lots of people have opinions about how to make life more efficient.

If that’s a little to abstract, just think about the gas in your gas tank. It’s an asset you use to get from point A to point B by means of a car. Eventually it runs low or out and you have to get more by transforming the asset of cash into the asset of gas by means of a service station.

Growth is more interesting. It seems like there might be at least two types; feedback growth and forward growth. Feedback growth occurs when a supplying asset is also a resulting asset. It doesn’t necessarily need to grow. Catalysts for example aren’t consumed by a process but are assets necessary for the process and are effectively products of those processes. Systems with network externalities do grow based on feedback, these do need to work in concert with other assets that are consumed. For example, social networks grow as a function of the number of participants, but this is at the expense of the pool of people who are not part of the social network yet. When that runs dry the process stops.

Forward growth may be just feedback with a longer loop. For example, when you are young opportunities (an asset) are relatively few, but one of those opportunities is to get a good education. Having a good education provides you with many more opportunities that you had otherwise many of which aren’t further education but also weren’t available before you got your education.

The notions of investment and profit apply to these growth modes as well.

If you were to say that this is just another way of looking at dynamic systems, then you’d be right. The relabeling though, seems to help me to identify opportunities that might be hidden. It’s certainly interesting to look at business opportunities through this lens.

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Lou Gerstner on Corporate Culture

“When I came to IBM I was a guy who believed in strategy and analysis. What I learned was that corporate culture is not part of the game: It is the game.”

– Louis V. Gerstner Jr., Who Says Elephants Can’t Dance?: Inside IBM’s Historic Turnaround, New York, NY: HarperBusiness, 2002.

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Simon Wardley OSCON 2014 Keynote: “Introduction to Value Chain Mapping”

I considered this talk to be the gem of OSCON 2014 (O’Reilly Open Source Conference). I think his insights into backwards causality (67% of all successful generals bombard hills) and crossing value chains with market maturity are brilliant.

Here’s Simon’s OSCON 2014 keynote …

Simon Wardley OSCON 2014 Keynote: "Introduction to Value Chain Mapping

Here’s a more extended keynote from the 2013 Alfresco Summit …

Alfresco Summit 2013: Keynote Speaker Simon Wardley: Situation Normal Everything Must Change

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Large Organization Skills

Areas of Emphasis Chart

I work in a giant corporation that’s nominally organized in the usual military model hierarchy. Yes, there are lots of subtleties, variations, and experiments (matrix management – gag, two in a box, self managed teams, etc.), but this has been the dominant model for as long as I’ve been there. I’ve spent a lot of years trying to sort through what I should be expecting from whom in each layer of management and I think I’ve finally come up with a model that works for me. I’d like to share it with you.

This is my “Areas of Emphasis” model and it describes where you put, or should be putting, most of your attention depending on where you’re at in an organizational hierarchy.

Areas of Emphasis Chart
Where each layer in a large organization’s hierarchy puts most of their attention.

The model crosses seven layers of management with seven areas of emphasis. An area of emphasis is where a person at that level spends most of their time, focus and energy. There are a few general principles embodied in the model. These include…

  • Advancement – After doing the job that you’re supposed to be doing, you spend the most amount of the rest of your energy learning how to do the job at the next layer up in the hierarchy.
  • Don’t look back – As you move up the hierarchy, you hire people to do the job you just left. As a result your attention to these matters drops sharply and is primarily composed of oversight and guidance. The alternative is micromanagement.
  • Appreciation – No matter where you’re at in the hierarchy you must maintain enough knowledge and understanding of the other areas of emphasis to relate effectively to those who focus on those areas.

Individual Contributors primarily focus on Technical Skills – This group refers to what’s often referred to as the “rank and file” (again another military allusion). These are not staff positions, which make different kinds of contributions depending on the level of the manager that you’re working for. Individual contributors spend the bulk of their time focusing on delivering the technical skills that are required to make the organization effective. “Technical” in this sense is defined broadly and can range from the ability to lift heavy things to modifying the genetic structure of arcane viruses. To cite too many metaphors, this is where “the rubber meets the road”. It’s the organization’s contact point with the physical and economical world. Without these folks the organization would be an abstract entity and fairly pointless. Beyond the contributions of their technical skill they will also spend a lot of time on team building and a fair amount on process.

First Level Managers primarily focus on Team Building – It’s often observed that the best first level managers have a strong working appreciation of the skills of those who work for them. It’s also true that the definition of a knowledge working is someone who knows more than their boss (I think it was Peter Druker who said something like this). A first level manager’s emphasis moves away from technical skills and focuses on team building. Insuring that the team has the right arrangement of skills and that the team produces effectively together and works well within the larger system.

Second Level Managers primarily focus on Process – Second level management is the first layer where managers manage other managers. It begins the process of abstracting away individuals in favor of a self sustaining organization. This is primarily accomplished through the creation and management of processes. These are behavioral structures that are independent of the individuals performing them. As individuals come and go and teams come and go the processes live on and begin to give the organization a life of its own.

Third Level Managers, Directors, focus on Delegation – Third level management is the first layer that provides the organization with meaning. The primary emphasis of their position is to clearly define and to clearly delegate the objectives that the organization can be applied to. A key element is crafting the vision of what the organization is to become and to be known for. This vision is decomposed into tasks that can be accomplished by the processes and individuals in the organization whatever the purpose of the moment happens to be.

Vice Presidents focus on Deal Making – Vice presidents create opportunities that the organization can act on. They have the authority and responsibility to seek out these opportunities and to make the deals that provide the organization with purpose. Their contribution to the vision is to describe how the world will be changed because the organization exists and chooses to act and less about what the organization will be.

Senior Vice Presidents focus on Portfolio Management – Senior vice presidents spend their time trading off the opportunities that the vice presidents bring to the table with the purpose of optimizing investments and portfolio value. They tend to have less influence on any particular vision and more focus on the key measured outcomes of the larger organization as a whole.

CEOs and Executive Vice Presidents manage Small Economies – A very large organization has many, hopefully complementary, moving parts. Each of these parts tends to be a portfolio of initiatives and objectives. For the larger organization to be successful these parts need to operate synergistically. The knobs at this level tend to be belief systems, reward systems, redistribution of investments, establishing key organization wide metrics and other mechanisms often attributed to governments and their management of larger economies. It is very much a social engineering activity.

In my position, a member of staff for a director, I can find myself interacting with people in each of these layers at any given moment. This model helps me to understand what they’re likely to be caring about. It also helps me to evaluate what’s working and what’s dysfunctional in various parts of the organization. Sometimes it helps. Sometimes it just makes me frustrated.

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